Climate change

A few key results

Science-based target

Set to reduce our greenhouse gas emissions by 21% from 2015 levels by 2025.

$70bn environmental financing target

Financing activities planned to help address climate change and support the transition to a low carbon economy have increased to $70bn by 2025 from our previous target of $55bn.

Why is this important?

NAB recognises that climate change is a significant risk and a major challenge for the global economy and society. Financial regulators have also acknowledged climate change is a systemic financial risk which they are incorporating into supervisory frameworks.

We support the transition to a low carbon economy, and will seek to manage our portfolio to align with the Paris Agreement goal of keeping global warming to less than two degrees Celsius, striving for 1.5 degrees Celsius above pre-industrial levels. We will review targets each year against the latest global climate scenarios and relevant technology developments.

NAB will take a range of actions to help meet the goals of the Paris Agreement on climate change while supporting security of energy supply in Australia and New Zealand and working with customers, related suppliers and their employees and communities in which they operate.

These measures include:

Increasing plans to provide environmental finance from $55 billion to a targeted $70 billion by 2025. We are Australia’s largest arranger of renewable energy finance¹ and 69% of our energy financing portfolio in 2019 was for renewables.
Supporting current customers involved in coal-fired power generation that are implementing transition pathways aligned with Paris Agreement goals of 45% reduction in emissions by 2030 and net zero emissions by 2050. NAB will not finance new or material expansions of coal-fired power generation facilities unless there is technology in place to materially reduce emissions.
Capping thermal coal mining exposures at current levels and reducing thermal coal mining financing by 50% by 2028 and effectively to zero by 2035, apart from holding guarantees for current customers for rehabilitation of existing coal assets. NAB will not take on new-to-bank thermal coal mining customers.
Increasing our internal renewable energy consumption commitment from 50% to 100% by 2025 and joining the RE100 initiative .

A long-standing objective of our climate change strategy has been to learn by doing and then incorporate this knowledge into how we manage environment, social and governance (ESG) risks and provide products and services to assist our customers.

Our climate change strategy focuses on the following four areas:

Leadership commitments
Developing climate change knowledge and insights
Supporting our customers through the low-carbon transition
Investing in organisational capability to identify and respond to climate change risks and opportunities.

For more details about our climate change strategy and governance refer to our Sustainability Report (PDF, 2 MB).

Download our Environmental Agenda (PDF, 301 KB).

Important Information

1. Data Source: BloombergNEF Country Profile for Australia - Top Renewable Energy Players (2004 to 3Q 2019).

We’ve set a science-based target to reduce greenhouse gas emissions

We have set a science-based target to reduce greenhouse gas (GHG) emissions from our operations by 21% from 2015 levels by 2025. The target, set in early 2016, supports our commitment to the internationally agreed goal to limit global warming to less than 2 degrees Celsius above pre-industrial levels. A science-based emissions reduction target is one that is consistent with what scientists say is necessary to keep global warming below the threshold of two degrees Celsius.

Our target covers:

all direct GHG emissions (Scope 1)
indirect GHG emissions from consumption of purchased electricity, heat or steam (Scope 2) across all GHGs required in the GHG Protocol Corporate Standard – with the exception of data centre emissions.

We have adopted the Sectoral Decarbonisation Approach’s ‘Service Buildings’ methodology¹ as the most appropriate given the nature of our business operations. Our Scope 1 and 2 targets have been submitted to the Science-Based Target Initiative for informal review, and they have confirmed that the target is considered science-based.

We have not set a target for Scope 3 (value chain) emissions, as there is currently no standard framework or agreed methodology for science-based targets for finance-related activities. We have participated in the United Nations Environment Program Finance Initiative/World Resources Institute/2^o Portfolio Carbon Initiative, which investigated the development of standardised approaches to disclosure on carbon-related risk exposure and performance for financial institutions. We welcome the opportunity to continue to participate in future developments in this area.

Data centre emissions, which accounted for around 27% of our 2015 base year emissions, have been excluded from our target as the ‘Service Buildings’ methodology is not appropriate for data centres. Instead, we have offered to pilot a science-based target for data centres if, and when, a draft method becomes available. We have also set a target to have our data centres operate with a Power Usage Effectiveness of less than or equal to 1.5 by 2020.

We report on our progress against our science-based target in our regular annual carbon reporting.

Important information:

1. The Sectoral Decarbonisation Approach (SDA) is a methodology that allows companies to set emission reduction targets in line with a 2°C decarbonisation scenario. It is based on the 2°C scenario (2DS) developed by the International Energy Agency (IEA) as part of its publication, Energy Technology Perspectives.

We’ve made a number of commitments to help address climate change and support the transition to a low carbon economy

We recognise that climate change is a significant risk and complex challenge requiring action at all levels – local, state, national and international - and by all stakeholders.

We believe an effective United Nations agreement will:

provide both context and a framework for national actions and policies
facilitate international cooperation
address the challenge of climate change.

It will also support the globally agreed goal to limit global warming to less than 2°C, striving for 1.5°C above pre-industrial levels, as well as giving regard to science-based reduction targets and the policy and market mechanisms necessary to assist in achieving greenhouse gas (GHG) reductions.

An effective international agreement should assist in providing business with the certainty and frameworks it needs to scale up global investment in low carbon technologies and infrastructure and lead to the creation of significant new business opportunities.

We believe the financial sector has an important role to play in assisting the transition to a low carbon economy, through both the energy we purchase directly and through financing. This transition however, needs to take place in a considered and balanced manner, supported by a stable policy environment that can underpin the transition and provide investment certainty over time.

Our commitments

In recognition of the role we can play in supporting the transition to a low carbon economy that limits global warming to less than 2°C, NAB has adopted three “We Mean Business” Coalition climate change commitments¹. In addition, we have made further commitments that demonstrate our intention to continue to take a leadership role through how we source energy for our operations and support our customers through financing activities.

1. Undertake financing activities of AUD $70 billion over the ten years to September 2025 to help address climate change and support the transition to a low carbon economy

In the 2019 financial year, the Group reviewed its Climate Change Strategy and increased its environmental finance commitment to support green infrastructure, capital markets and asset finance from $20 billion to $35 billion (taking the Group’s total environmental finance commitment from $55 billion to $70 billion by 2025). This commitment was previously increased in 2017 from $18 billion by 2022 to $55 billion by 2025) and now includes:

$35 billion to support green infrastructure, capital markets and asset finance
$35 billion in new mortgage lending flow for 6 Star residential housing in Australia.

Our environmental financing activity includes:

lending for green commercial buildings
specialised lending; corporate and securitisation finance for projects that reduce emissions and assist with climate change adaptation; and lending to other low carbon businesses
asset finance
green term deposits
green bonds funding
advisory activities, underwriting or arranging
lending for 6 Star Residential properties

Further information on how we calculate our environmental financing is outlined by category in our Environmental Financing Methodology.

We’re the leading arranger (by market share)² of project finance for renewable energy in Australia, having arranged $9.4 billion in project finance since 2003.

We have increased and broadened our activity, including a number of industry-leading initiatives such as:

In 2019:

NAG participated in eight public green, social and sustainability bond deals and three sustainability-linked loans including:

Arranging Australia’s largest ever green bond – the $1,800 million TCorp Green Bond; and arranging the world’s first Climate Bond certified green bond for a retail property landlord – $300 million Queensland Investment Corporation Shopping Centre Fund green bond.
UBank launched the world’s first Climate Bond certified consumer Green Term Deposit. This product won ‘Best Green Innovation’ at the Finder Awards.

In prior years our activity included:

Launching the first Australian bank green bond and the first bank-issued Climate Bonds Standard certified bond globally to finance A$300m of renewable energy assets.
NAB has been recognised as a 'Green Bond Pioneer' by Climate Bonds Initiative and London Stock Exchange for our work in developing the Australian green bond market.
Arranging Australia’s first sustainability bond, Australia’s first green securitisation bond, Australia’s first semi-government green bond, Australia’s first semi-government sustainability bond, Australia’s first US Private Placement (USPP) green bond and the first green bond issued in New Zealand.

2. Source 100% of our Australian electricity requirements from renewable energy sources by 2025

This commitment was increased in 2019 from 50% to 100%. (The commitment was previously increased in 2017 from 10% by 2018 to 50% by 2025). NAB has joined the RE100 initiative – bringing together businesses committed to using only renewable electricity.

Minimising the environmental impact of our business is a key focus of ours. In 2010, we became the first Australian bank to achieve National Carbon Offset Standard certified carbon neutrality and we maintain this through an on-going focus on energy efficiency and other carbon reduction initiatives. We’ve achieved this by:

reducing the amount of energy we used by our equipment, lighting, heating and cooling
installing solar panels on branches
switching from brown coal-fired grid electricity to tri-generation and co-generation at two key sites
purchasing offsets to neutralise remaining emissions.

Sourcing 100% of the electricity we need from renewable energy sources will continue to reduce our carbon emissions and help scale-up Australian-based low-emissions infrastructure and renewable energy generation.

3. Engage responsibly on climate policy

We will continue to engage in dialogue with key stakeholders, including customers and the wider community, to help inform how we advocate on climate policy with all levels of government. We will also ensure that our engagement on climate policy is co-ordinated and consistent and we will communicate our position, actions and outcomes annually through our CDP climate change survey response and annual report suite of documents.

4. Report climate change information through mainstream reporting channels and increase our carbon risk disclosure in half and full-year results and annual reporting, incorporating stakeholder input

Consistent with our commitment to transparency and integrated reporting, we are committed to identifying, developing and implementing ways to improve disclosure on carbon risk exposure through collaboration with other financial institutions, both in Australia and internationally. We have publicly reported on our GHG emissions since 2003. We are aligning our GHG reporting with internationally recognised climate change reporting frameworks, such as the Climate Disclosure Standards Board’s Climate Change Reporting Framework and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We continue to incorporate disclosure of relevant climate change related information in NAB’s Annual Financial Report and have included carbon-related disclosures in our Half and Full Year Investor Presentations since May 2015.

5. Commit to putting a price on carbon and align to the UN Global Compact’s business leadership criteria on carbon pricing

We first established an internal carbon price in 2010, as part of our commitment to achieve and maintain carbon neutrality. This has helped to drive investment in energy efficiency initiatives and helps us to achieve GHG reduction targets. We will continue to maintain the use of an internal carbon price and publicly communicate our understanding of how market mechanisms can help achieve GHG reductions. NAB will also continue to disclose, in our annual CDP climate change survey response and other relevant corporate publications, how we use our internal carbon price.

6. Set a science-based GHG emission reduction target for our operations

In 2019 we achieved an 18% reduction in emissions against our science-based emissions reduction target to reduce GHG emissions by 21% by 30 June 2025 from a 2015 base year.

We have since announced we will join the Principles for Responsible Banking Collective Commitment to Climate Action in the first quarter of 2020. This will involve NAB: (a) setting targets to align our lending exposures to support the low carbon transition and the Paris Agreement and (b) developing sector-specific plans to support our clients in accelerating the low carbon transition.

7. Commit to transparency and integrated reporting which means we are working to identify, develop and implement new ways to deliver on our commitment to carbon risk disclosure

We continue to respond to the CDP Climate Change Survey and have maintained our National Carbon Offset Standard Certification.

In 2019 we signed up to the UN Principles for Responsible Banking.

We will also undertake further transition risk scenario analysis on coal-related sectors which will help us map transition pathways for coal-related sectors.

Important information:

1. Commitments 3, 4 and 5 adopt three of the CDP (formerly the Carbon Disclosure Project)-led “We Mean Business” Coalition global climate change commitments.

2. Data Source: BloombergNEF Country Profile for Australia - Top Renewable Energy Players (2004 to 3Q 2019).

We’re Australia’s first carbon neutral bank

In 2010, we became the first Australian owned bank to achieve carbon neutrality under the National Carbon Offset Standard (NCOS) Carbon Neutral Program. We achieved this through a concentrated focus on energy efficiency, the use of cleaner energy sources, and the purchasing and retirement of offsets to neutralise remaining emissions.

We define carbon neutrality as a process involving five steps:

Defining and measuring our carbon (greenhouse gas) inventory.
Reducing our greenhouse gas emissions through energy efficiency, demand management (employee behavioural change) and transitioning to lower emissions energy sources, where it’s practicable.
Avoiding emissions through the purchase of renewable energy (where we choose to use renewable energy to support our strategy of investing in local emissions abatement).
Offsetting remaining emissions through the purchase of quality carbon offsets.
Verifying and reporting on our progress by:

regularly assessing our carbon neutrality and reduction targets
obtaining annual external verification and assurance of our carbon accounts (inventory and offsets) and carbon neutral commitment
reporting regularly to key internal stakeholders and annually to external stakeholders in our Sustainability Report (PDF, 2 MB).

We lead by example

Maintaining our carbon neutral status is an important part of our strategy to reduce our climate change impact. It also illustrates our commitment to 'lead by example' in the delivery of our Environmental Agenda.

We've been operating on a carbon neutral basis (meaning our net emissions of greenhouse gas from our global operations – as defined in our carbon inventory - have been zero) since 1 July 2010. In FY2020 we will celebrate our 10th year of maintaining carbon neutrality.

How we calculate our carbon emissions

Our carbon inventory includes greenhouse gas emission sources from operations in Australia, Asia, New Zealand, the United Kingdom and the United States. We currently exclude an immaterial source of emissions from a small subsidiary in Canada.

Work on our carbon inventory is ongoing. For some emissions sources, it’s difficult to get access to the activity data needed for accurate greenhouse gas calculations. However, we can provide a picture of the items in our inventory that have been calculated for each of our businesses.

Download our emissions sources report (PDF, 37KB).

Scope 1 and 2 emissions

The boundaries for Scope 1 and 2 emissions have been determined using an operational control approach. More specifically, in Australia and the UK, the boundary requirements for most Scope 1 and 2 emissions are covered by the regulatory requirements of the National Greenhouse and Energy Reporting Act 2007 (Cth) (Australia) and the Carbon Reduction Commitment Energy Efficiency Scheme (UK).

Using these regulatory reporting requirements to define our Scope 1 and 2 emissions and boundaries for reporting helps support us to meet our compliance obligations and ensures we are aligned with our regulatory reporting requirements.

Download details about our methodology and emissions factors (PDF, 146KB).

Scope 3 emissions

For Scope 3 emissions, we’ve used an operational control approach and developed principles and criteria - outlined in our Group Environmental Reporting and Offset Management Policy (PDF, 158KB) – to define the emissions sources included in our carbon inventory.

A summary of the key methodologies, assumptions and emissions factors applicable to each emission source reported by our businesses are provided below.

Reporting Library

Asia Carbon Inventory 2018 (PDF, 108KB)
Australia Carbon Inventory 2018 (PDF, 119KB)
New Zealand Carbon Inventory 2018 (PDF, 72KB)
United Kingdom Carbon Inventory 2018 (PDF, 55KB)
United States Carbon Inventory 2018 (PDF, 40KB)
NAB Group Carbon Inventory 2018 (PDF, 34KB)

Our approach to offsetting

Our Group Environment Reporting and Offset Management Policy helps us make sure that we purchase offsets that are real, quantifiable, additional and permanent. Each year, we also ensure sufficient offsets are retired to neutralise our carbon emissions.

The total portfolio of offsets purchased and retired to date includes offsets issued under the Australian Emissions Reduction Fund, the Gold Standard, the Verified Carbon Standard, the New Zealand Emissions Trading Scheme and the Clean Development Mechanism.

Our purchased offsets have come from over 40 separate projects to date including:

savanna burning projects in Australia;
forestry projects in Australia, New Zealand and Papua New Guinea;
solar projects in China, Taiwan and India;
wind farm projects in China and India;
a rice husk power plant in Thailand;
fuel switch projects in Brazil, Thailand, China and India - generating industrial heat from renewable biomass instead of fossil fuel;
a Thai biogas utilisation project that replaces oil usage with methane from waste water;
run of river hydro power projects in China, New Zealand and India; and
upgrades to geothermal plants in Turkey and Indonesia.

When purchasing our offsets, we look for opportunities that deliver not only accredited and verified emissions reductions, but also provide health, education and additional social and environmental benefits and infrastructure for local communities in the areas in which the offset projects are delivered.

Forward purchasing offset model

We use a forward purchasing model to meet our carbon neutral commitment. This type of model calculates forecast carbon emissions for the forthcoming year using the actual carbon emissions reported in the prior year's audited carbon inventory.